Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/185319 
Year of Publication: 
2018
Series/Report no.: 
IZA Discussion Papers No. 11859
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
We run two field experiments within a large retail chain showing that the effectiveness of performance pay crucially hinges on prior job experience. Introducing sales-based performance pay for district- and later for store-managers, we find negligible average treatment effects. Based on surveys and interviews, we develop a formal model demonstrating that the effect of performance pay decreases with experience and may even vanish in the limit. We provide empirical evidence in line with this hypothesis, for instance, finding positive treatment effects (only) in stores with low job experience.
Subjects: 
performance pay
incentives
learning
experience
insider econometrics
field experiment
randomized control trial (RCT)
JEL: 
J33
M52
C93
Document Type: 
Working Paper

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